Improving Mega Projects

Productivity Through Planning and Supply Chain Best Practices –

Panel Discussion

Panelist Rob Beekhuizen

Hal Williams Paul Zubick

Moderator: Dr George Jergeas PEng Date: October 24

PANEL: 11:15AM-12:30PM

Panelist

Rob Beekhuizen

Hal Williams

Paul Zubick

2

Rob Beekhuizen Bio

Vice-President, Construction (Fluor Canada)

Construction portfolio incl. Energy & Chemicals, Mining, Infrastructure projects in Canada (ca. $25 billion in EPC value)

Professional Engineer (APEGA) with 28 years industry experience including Owner and Contractor organizations

3

Hal Williams Bio

Hal Williams, P.Eng, Vice President-Operations, KBR

30+ years experience in the Alberta construction, fabrication and module assembly industries

25+ years with KBR, all out of Edmonton

4

Paul Zubick

Waiward Steel Fabricators Ltd.

Vice President Contracts

Canadian Institute of Steel Construction

Chairman – Alberta Region

Alberta Steel Manufacturers

Committee Member

5

Slide 6 George Jergeas

Slide 7

PHASE 2 SELECT from

Alternatives

Determine

Project

Feasibility

and

Alignment

with

Business

Strategy

Project Phases or the Gated Process

PHASE 1 IDENTIFY & Assess

Opportunities

Finalize

Project

Scope, Cost

and Schedule

and Get the

Project

Funded

Select the

Preferred

Project

Development

Option

Evaluate

Asset to

Ensure

Performance

to

Specification

s and

Maximum

Return to the

Shareholders

PHASE 3 DEVELOP Preferred

Alternative

PHASE 4 EXECUTE

(Detail EPC)

PHASE 5 OPERATE &

Evaluate

Produce an

Operating

Asset

Consistent

with Scope,

Cost and

Schedule

1 2 3 4 5

AFE

-DBM - Application

- AFE(F/E)

-FEED -Long-Leads

- Reg. Approval - AFE

- Detailed Design - Procurement

- Fabrication -Construction

-Commissioning

-Start-Up - Perf’m Testing - De-bottleneck

-Feasibility

George Jergeas

Slide 8

Symptoms

■ Projects over budget & schedule

■ Consistently 50% to 100% cost overruns

■ Low labour productivity

■ Economics suffer

■ No predictability

■ Investors (boss) lose confidence

■ Client not happy

■ Blame: ● EPC Contractors

● Vendors

● Construction Contractors

● Workers

● Clients George Jergeas

9

Industry Survey

Survey question What do you suggest to improve

construction productivity in the delivery of the oil and gas capital projects?

77 highly experienced people Owner, EPC and Constructors

309 recommendations

10

Top 10 Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in

Shops

Panel Discussion

What can we do about the challenges facing construction projects in the energy sector?

11

Rob Beekhuizen

12

About Fluor

• 100 years old with roots in construction

• Provides fully integrated EPC solutions incl. fab-mod and craft labour (building trades, open shop) for all sectors

• Rated 124 in Fortune 500 companies (43,000 employees. Revenues $24 billion /yr)

• Execute nearly 1,000 projects annually, serving more than 600 clients in 70 countries

• Executed almost 3 billion hours in the field globally in the past 10 years

• Operating in Canada for more than 60 yrs with project execution history in 9 of 10 provinces

14

Industry Survey: Top 10 Focus Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in

Shops

15

Top 10 Areas & ‘What to Do’? -- Labour Management, Conditions & Relations

• Understand & plan for variable demographic supply sources incl. cost /training impacts (local, regional, national, TFWs)

• Benchmark a fair pay-/site- package. Collaborate (don’t overly compete) w/ Owners in the area. Tap into subcontractors’ practices

• Win the hearts of the workforce. Establish a reputation of a well-run site. Attentive management. Core values. Give the workforce a voice.

• Prepare / share the gameplan with crews & subs. Establish a program of “first-downs” (HSE, Mat’ls-installed). Recognize & inspire success – celebrate the short-wins. Reward milestones & completion

• Create a sense of purpose /opportunity. Develop supervision & craft. Train Supts /GFs /Foremen in mgt techniques, mentorship. Offer craft apprenticeship programs. Collaborate w/ subcontractors

• Avail the tools /equipment needed to get the job done.

16

Top 10 Areas & ‘What to Do’ ? Construction Planning / Workface Planning

• Map the estimate into sensible “control buckets” that match w/ how the contractors & subs will control during execution (versus acct’g /SAP-driven code of acc’ts)

• (Re)validate the control-structure & estimate w/ how expenditures are incurred, invoiced (POs, subcontracts). Does it make sense? If not re-adjust.

• Create ‘Path of Construction’ w/ ‘flow of work’ across CWAs. Link CWPs /FIWPs per CWA per craft discipline.

• Subdivide control-structure estimate, schedule & mat’ls into WFP subsets as ‘nested’ CWPs /FIWPs. Link them

• Conduct ‘Early Reality Check’ w/ Supts & Subs. Get buy-in. Can crews meet CWP (mat’l, mhr) targets? Re-adjust ?

17

Top 10 Areas & ‘What to Do’? -- Construction Management & Support

HSE Management (Culture of Excellence - Owners & Contractors)

• Mutual Commitment incl. w/ Exec sponsors

• Integrated site HSE leadership committee (Owner’s & Contractors)

• Align on goals, practices, leading indicators, treatment protocols

• Engage Craft to support improvement initiatives. Reward success

• Proactive intervention vs. Leading Indicators. Don’t wait

Quality Management (‘No Surprises’):

• Pre-align on ITPs, pass-criteria, check-points, remedy expectations

• Align Owner & Contractors on process to expedite tech-queries, RFIs, corrective action. (Train personnel, Mutual database access)

Productivity Management (Know the Plan. Where You’re At. What to Do):

• Align on Qty Survey, Installation Manhrs, Shift Reporting per plan/targets

• Invoke Corrective Action Plans. Collaborate on Interface Mgt Issues (tech data/dwgs, mat’ls, resources, equip’t /technology)

18

Top 10 Areas & ‘What to Do’ ? -- Effective Supervision & Leadership

Role /Relationship of Exec Sponsors in Support of PMs

• Align business relationship at exec level btwn Owner-Contractor. Hold Sponsors meetings. Mutually address perf’m fundamentals

• Clear the path - address internal alignment (org) issues impacting project perf’m w/ other (functional) execs

Proactive Role /Relationship of Home Office FMs & Site Team

• Function Mgrs (FMs) need to proactively supply PMs/CMs w/ skilled functional staff, w/ effective systems, procedures, training

• PMs/CMs run day-to-day. FMs engage to engage to support functional perf’m & corrective action (HSE, QM, Controls, HR, Eng, etc)

Site Supervision (Superintendants): Keeping Crews & Subs to the Plan

• Supts - know the gameplan each shift, starting pt & exp. end pt

• Supts - Proactively engage site Indirects Mgt Team (FMs-Leads) to get support needed at workface to keep project on the gameplan

• Supts – shift reports incl. req’d measures for corrective action

19

Top 10 Areas & ‘What to Do’ ? Contracting Strategy /Contractor Selection

• Select the Contract that meets project drivers (cost-1st?, schedule-1st? , Q-reliability-1st ? HSE-targets)

• Understand # contractual interfaces & implications of EPC, EPCM, EP/CM/C. Choose wisely re project drivers

• Contractors are responsible to contract holder not necessarily to each other. How many times is the Owner in the middle?

• Commercial /Contract terms re project drivers? : LS, UR, T&M, Schedule LDs, Incentives??

• Any contractual certainty ($, t, Q, HSE) is factored in bid w/ risk provisions. Understand impact to contractor behavior /relationship

• Owner Team should adapt /adjust according to form of Contract. A Facilitator can cultivate Owner-Contractor relationship, protocols

20

Top 10 Areas & ‘What to Do’ ? Constructability in Engineering Design

• Design to maximize modularization & pre-fab. Set targets that drive design basis

• Design to reduce mass /distances: Cost = ftn (mass)

• Assess cost trade-offs – standardized designs that mitigate field man-hrs vs. mat’l quantities (e.g. formworks)

• Design to enable more horizontal const’n techniques vs. vertical in-place methods, e.g. tiered assembly methods

• Design steel structures to eliminate demand on scaffolding

• Use quick-fastening technologies (s.steel, piping, E&I)

• Develop constructability matrix w/ methods per discipline

21

Top 10 Areas & ‘What to Do’ ? Modularization, Prefab, Pre-build in Shops

• Maximize modularization to include E&I (70% modularized plants are achievable)

• More than 85%+ piping can be pre-fabbed. Also 120’ double-length sections to reduce site welding

• Cladded module exteriors ‘clam-shelled’ together to form buildings

• Piled structures for pre-fabbed bldgs. Pre-fabbed rebar grids for poured slabs.

• Pre-fabbed sub-assemblies: tanks, large vessels bldgs

• Site pre-assembly zone for aggregating truckable sub-modules into VLMs, and other fabbed sub-assemblies

Hal Williams

22

KBR

International EPC Contractor, Head Office: Houston, Texas Canadian Head Office: Edmonton, Alberta - General Industrial Contractor - Pipe Spool Fabrication - Module Assembly - Turnaround Contractor - Maintenance Contractor

Focus on 3 Points

Agree completely with George’s 10 points.

1) Labour Management

2) Modularization and Pre-Fabrication

3) Contractual Strategy

Labour Management

- Turnover

Modularization & Pre-Fabrication

- Presently think horizontal, we need to start think vertical

Contractual Strategy

- Need to match the contractual strategy to the economic / construction reality.

Present Situation: Hot Alberta Economy

Results: All Alberta based suppliers are expanding

World recognizes Alberta opportunities

and are moving in.

Owner’s don’t plan for future but react to present cash flow.

Results: Watered down local personnel resource pool

New experts not familiar with oil sands or Alberta practices and experience.

Paul Zubick

29

Alberta Steel Manufacturers (ASM)

ASM companies provide industrial project owners with construction solutions that are produced and delivered safely, are of the highest quality, are sensitive to schedule and competitively priced.

ASM companies continue to develop an Alberta-based sustainable skilled workforce for the future benefit of all stakeholders.

30

Alberta Steel Manufacturers (ASM)

ASM companies provide industrial project owners with construction solutions that are produced and delivered safely, are of the highest quality, are sensitive to schedule and competitively priced.

ASM companies continue to develop an Alberta-based sustainable skilled workforce for the future benefit of all stakeholders.

31

32

Top 10 Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in Shops

33

Top 10 Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in Shops

34

Top 10 Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in Shops

35

Top 10 Areas

1. Labour Management, Conditions and Relations 2. Proper Project Planning and Workface Planning 3. Construction Management and Support 4. Engineering Management 5. Effective Supervision and Leadership 6. Communication 7. Contractual Strategy and Contractor Selection 8. Constructability in Engineering Design 9. Government Influence 10. Modularization, Prefabrication, Pre-build in Shops

36

Front-End Planning

Requires input from stakeholders from procurement, engineering, projects, supply chain, construction, and operations

Engage major supply chain stakeholders early

Requires a contracting strategy that allows this

Requires TRUST

37

Front-End Planning

TRUST

Stakeholders to be motivated to share expertise and deliver value

38

Front-End Planning

TRUST

that the process will deliver value

39

Front-End Planning

CONSTRUCTION

CONSTRUCTION

PROCUREMENT

ENGINEERING

40

Front-End Planning

CONSTRUCTION

CONSTRUCTION

PROCUREMENT

ENGINEERING Strategic

Components

41

PEpC (Procurement, Engineering, procurement and Construction)

An innovative project delivery system which makes it possible to utilize supplier expertise in all phases of the project life cycle by developing an advance procurement strategy and reaching agreement with suppliers on strategic procurement items and/or systems prior to the associated project engineering activities.

Front-End Planning

42

Contractual Strategy and Contractor Selection

Select appropriate contracting strategies to allow for PEpC

In PEpC, the suppliers of project critical

components can play an active role in defining their own contribution to the engineering, design, and construction processes.

43

Contractual Strategy and Contractor Selection

COST CERTAINTY

BEST VALUE?

44

Contractual Strategy and Contractor Selection

COST CERTAINTY

BEST VALUE?

45

Contractual Strategy and Contractor Selection

LOWEST TOTAL COST OF OWNERSHIP

BEST VALUE

46

Constructability in Engineering

Involve operations and construction in detailed engineering

Timely constructability inputs

Align engineering schedule with construction schedule

Standardize designs between silos with multiple EPC’s

Lessons learned come from those who have experience

47